Identify Which of the Following Statements Is True

question 68

Multiple Choice

Identify which of the following statements is true.

• A)The control requirement for Sec. 355 differs from the control requirement under Sec. 351.
• B)Aspect Corporation transfers assets to newly created Expert Corporation in exchange for all of Expert's stock. Shortly after the transfer, Aspect exchanges one-half of the Expert stock that it receives for land. The individuals transferring the land have never been Aspect shareholders. This transaction qualifies as a divisive Type D reorganization and is tax-free to all parties.
• C)Common stock can be exchanged for preferred stock in the same corporation as a Type E reorganization.
• D)All of the above are false.

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Definitions:

Traceable Fixed Expenses

Fixed costs that can be directly linked to a specific business segment, product, or operation and would disappear if the segment was discontinued.

Common Fixed Expenses

Fixed costs that are not directly attributable to a specific product or service line and must be paid regardless of the level of production or sales.

Contribution Margin

The amount remaining from sales revenue after variable costs have been deducted, indicating how much revenue contributes to covering fixed costs.

Variable Selling Expense

Expenses that fluctuate in direct proportion to sales volume, including commissions and freight fees.